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Dongbu pulls back from farm business

Move deals a blow to government’s plan to cultivate farm enterprises with corporate capital

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Published : 2014-03-03 20:16
Updated : 2014-03-03 20:16

Asia’s largest glass greenhouse, run by Dongbu Farm Hannong, in Hwaong, a reclaimed area in Hwaseong, Gyeonggi Province. (Dongbu Farm Hannong)
Dongbu Farm Hannong, the agrochemical business unit of Dongbu Group, said on Monday that it would close its farm business by selling off related assets.

“As the continued opposition from farmers against the firm’s new business has dealt a blow to sales of other key products, the company decided to pull back on its plan to enter the farm business,’’ the company said in a press release.

Farmers are key customers for Dongbu Farm Hannong, which deals mainly in crop protection products, fertilizers and seeds.

“In an effort to prove the firm’s plan to withdraw from the farm business, the company will soon sell off its 40,000-square-meter glass greenhouse in Nonsan, South Chungcheong Province,’’ the company said.

The deal will be the second asset auction involving its farm business, following the sale of the 150,000-square-meter Hwaong glass greenhouse on reclaimed land in Hwaseong, Gyeonggi Province.

The company completed the cutting-edge greenhouse, Asia’s largest, in 2012 under a plan to grow tomatoes for export to Japan. However, the firm stopped production of tomatoes last March due to strong resistance from local farmers and decided to sell the facility.

“The company tried hard to assure farmers that its farm business targeted overseas markets only, but it failed to quell their doubts over a possible entry of big companies into the local crop production market,’’ said Hwang Hee-chang, a spokesperson for Dongbu Farm Hannong.

At the end of last year, the nation’s leading agricultural company signed an agreement with Green Farm, a farming cooperative, to sell its entire 68.4 percent stake in the Hwaong glass greenhouse.

According to industry sources, the two sides are still in discussion about the selling price. It is estimated that Hwaong will be sold for 35 billion won ($33 million), well below the 40 billion won to 50 billion won that the company proposed at the beginning of the negotiations.

“Despite the increased loss from the business withdrawal, the company will push ahead with the asset liquidation plan to ease farmers’ concerns,’’ Hwang said.

Besides the sale of assets in the farm business, Dongbu added it would scrap its future investment plan.

“The company will also pull back on a plan to build a 750,000-square-meter glass greenhouse in Saemangeum, reclaimed land in North Jeolla Province, by 2015,’’ the company said.

Dongbu Farm Hannong’s withdrawal from the farm business will also have a negative impact on the government’s plan to cultivate farm enterprises by attracting capital from private companies outside of the nonagricultural sector.

In an effort to advance the nation’s outdated and family farm-driven agricultural sector, the Ministry of Agriculture, Food and Rural Affairs has supported the entry of big companies in the crop production sector under the condition that they target overseas markets with their farm products.

By Seo Jee-yeon (jyseo@heraldcorp.com)

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